It comes as no surprise to say that we’ve had a few hard years. Despite entering the third year of the pandemic, the US economy has been on a path towards recovery. However, recovery can be difficult, and 2022 will not be without its own hurdles. Inflation, taxes, and Omicron are current challenges that stand between us and full economic recovery. But these conditions, at least according to the leaders of the Federal Reserve, are something the U.S. economy is prepared to withstand.
As reported by Reuters’ Howard Schneider and Ann Saphir, the Fed and its leader Jerome Powell are confident that the economy can defend itself from Omicron while juggling inflation. In late 2021, the Fed had announced that it would be ending its pandemic related aid, to keep from inflating the economy to rapidly. Inflation has exceeded the Fed’s forecasted rate, and as a result the Fed is expecting at least three interest hikes in the spring.
Taxes VS Inflation and Omicron
Inflation affects all aspects of life. Higher costs of living have resulted in adjusted tax tables by the IRS. Josephine Nesbit reports for gobanking.com on the impact of inflation. The 2022 federal tax withholding tables have increased its inflation factor by 3 percent, lowering the overall amount of taxes subtracted from our paychecks.
Specifically for retired seniors, annual tax-deductible contribution limits will increase. This means that seniors can lower their tax liability by investing into their retirement savings accounts, like a 401k. In addition, the inflation has resulted in higher Social Security benefits to meet the adjusted cost of living. Taxes are a little more complicated this year, due to Covid-related tax credits. The Fed has slowed stimulus payments, with the intent to stop them in March, but between then and now people still have the chance to claim credits and aid.
Why It All Matters
Inflation, taxes, and Omicron are the foreseen challenges we’ll face in 2022. Inflation and taxes are ways of life, but the pandemic has changed everything, making it all the harder to stay ahead. For seniors on a fixed income life is expensive, but it can be manageable with proper planning. Understanding how to manage costs, like avoiding Medicare costs by staying healthy or by budgeting more because things are more expensive, are necessary in today’s world. By staying ahead, we thrive.
The Council for Retirement Security is working to protect seniors’ Social Security. Like inflation, taxes, and Omicron, Social Security is a part of our lives today — and must continue to be tomorrow.